Ukraine’s Cronyism Crisis Offers a Warning to the ‘De-Risking’ World
Luke Cooper analyzes a series of scandals that have exposed weaknesses in Kyiv’s public institutions. Ukraine’s wartime economy relies heavily on the massive mobilization of resources, funded both by domestic tax revenue and significant external aid from allies.
Often described as military Keynesianism, this economic model emphasizes government spending on defense and the military-industrial complex to stimulate domestic demand. This shift marks a major political change for Ukraine, historically known for its economically “libertarian” stance.
At the same time, Western countries are moving away from the “small state, free market” neoliberal approach toward more active state intervention. Markets left unchecked are failing to meet critical political objectives such as reducing inequality, combating climate change, fostering industrial growth, advancing technological innovation, and ensuring national security.
This renewed role of the interventionist state, though overdue, presents challenges in balancing the relationship between government and capital, raising risks to the public interest. These challenges are especially acute for Ukraine, where public institutions have long been vulnerable to capture by private interests.
Luke Cooper: “While this return of the interventionist state is long overdue, how to manage the relationship between state and capital is not straightforward and involves various threats to the broader public interest.”
Key Points
- Ukraine’s war economy channels domestic and external funding into defense and related industries.
- The approach resembles military Keynesianism, increasing state influence over the economy.
- This shift represents a significant departure from Ukraine’s prior economic philosophy.
- Western states are also embracing stronger government roles to meet social and security challenges.
- Balancing state intervention with protecting public interest remains complex and risky, especially in contexts prone to institutional corruption.
Author’s summary: Ukraine’s shift to a state-led wartime economy exposes risks of institutional capture, offering lessons for global efforts to balance market freedom and government intervention.